Duplicate content problem Hit by Panda

Hi,
we do have a large Ecommerce Magento based online shop with 300 categories.
All the categories are listed in mega drop down menu and the problem is all they are indexed by search engines and anchor text of each category cause duplicate content on each page of our site.

Right now we do have around 70% duplicate content on each page (15k) caused only by the drop down mega menu and I think we got hit by Panda...
We did lose 70% of traffic in last 3 months

All products are with unique content, unique meta titles and descriptions...
What should we do?

Use canonicalization tag for individual pages, and then seperate the 300 category pages themselves using other canonical rel tags. That should prevent indexing of a categorized unique product which would be produce duplicate content.

Ask someone about canonical tags, and how to fix your duplicated content indexes, I'm too tired to think.

Sasupo,

As dinkish points out, you basically want to let google know the canonical version of each page. Note that you are not being penalized for having the duplicate content, its just that some of those duplicate pages may not be served in search. You should clean it up if possible but if you are experiencing a drop in rankings, that is not the reason.

Heres more on canonicalization,

https://support.google.com/webmasters/answer/139066?hl=en

Best,

Shawn